JACK BOGLE: This Facebook Fiasco Is What Happens When All The Parties Involved Are Greedy

Morningstar
Vanguard Senior Chairman and founder Jack Bogle told CNBC TV today that he was not surprised by Facebook's lackluster performance during its initial public offering on Friday.

Denigrating the greedy atmosphere surrounding the IPO process, he suggested that investors expecting shares of Facebook to repeat the massive pop investors have seen in other tech offerings were being short-sighted and greedy.

This is not the first time this has happened in history ...

Jumping on the bandwagon was a very profitable thing to do for a while. But then the bandwagon or—the merry-go-round, to change the metaphor ever so slightly—the merry-go-round stops. It's like a game of Old Maid, as Lord Cain's told us. Somebody's always left holding the bad card. Or musical chairs; someone can't get into the last chair.

This is a classical example I think of investor greed, including institutional greed, and underwriter greed, and company greed. So the message to me is: when all the parties to a transaction are greedy, this is the kind of outcome you can expect.

Then again, Bogle revealed a general disdain for IPOs and trading in individual stocks in general, arguing that the only thing investors can truly predict is that corporate earnings will grow in the long term.

Don't fool around with new issues, new offerings, IPOs. Don't fool around even—I'd go all the way to saying—don't fool around with individual stocks. Nobody can predict their price performance. Nobody can predict their future value. And while nobody can predict the price of the total stock market, we can predict its future performance, which depends clearly and 100 percent on how the underlying American economy does and how corporations do in the long run.